2023 (3) TMI 10 - AT - Service Tax

Levy of Service Tax - manufacturer of parts for paper mill machinery and are also registered under the category of Consulting Engineer Service - HELD THAT - In various cases it has been held that there was no record available to show the manner in which the activities of repair work were carried out by the taxpayer since there was no contract or agreement. The Delhi Bench of the CESTAT in the case of M/s. Crimpson Electronics 2009 (7) TMI 80 - CESTAT NEW DELHI has held that There is nothing on record to show the manner how activities were carried out by the appellant to conclude that repair and maintenance charges were received instead of job work charges. Also there is no contract document available on record to explain the nature of repair and maintenance carried out. In this case further the Learned Deputy Commissioner for the Revenue was unable to distinguish the above orders nor was he able to contradict the contentions of the appellant as to the non-existence of contract / agreement. The demand cannot sustain for which reason the impugned order is set aside - Appeal allowed.

Summary

Issues:
Service Tax demand upheld by Commissioner of Customs, Central Excise and Service Tax (Appeals) - Whether demand is justified?

Analysis:
The appeal was filed against the Order-in-Appeal upholding the demand of Service Tax, interest, and penalty. The appellant, a manufacturer of parts for paper mill machinery registered under Consulting Engineer Service, argued that repair activity was incidental to manufacturing. The Revenue issued a Show Cause Notice for Service Tax demand from 2005-06 to 2008-09, which the appellant contested. The Adjudicating Authority confirmed the demand, leading to the appeal. The main issue was whether the Service Tax demand was valid.

The appellant cited cases decided in favor of taxpayers by the Delhi Bench of CESTAT. These cases highlighted the importance of documentary evidence like contracts or agreements to support repair work activities. In the absence of such evidence, taxpayers were granted relief. The appellant's Advocate referenced M/s. Crimpson Electronics and M/s. Kunal Fabricators & Engineering Works cases to support their argument.

After reviewing the orders from the Delhi Bench of CESTAT, it was noted that the lack of documented evidence regarding repair work activities favored the taxpayer. The Tribunal found that without a contract or agreement, the demand could not be upheld. The Revenue's Deputy Commissioner failed to counter the appellant's argument regarding the absence of a contract or agreement, leading to the conclusion that the demand was not sustainable.

Considering the precedents and lack of evidence supporting the Service Tax demand, the Tribunal set aside the impugned order. The appeal was allowed, granting the appellant consequential benefits as per the law. The judgment was pronounced in open court on 24.02.2023.